How do social networks monetize their core platform and applications? It's more than a billion dollar question, figuratively and literally. The social network companies such as Facebook does recognize the potential of an open platform for participation and developer-friendly attitude to let the community sip the champagne of the social network data. There is a plethora of applications built on Facebook platform and and this might be the key towards monetization. The other key players have also been experimenting with their platforms and business models but there is no killer business model, at least not yet.
Monetizing efforts do ruffle some feathers on the way since it is intertwined with other factors such as privacy, data portability, and experience design. The Facebook's experience design keeps applications' users inside of Facebook but at the same time provide the necessary, or sometimes unnecessary, access to user's data to the application providers. This has set off some debates around privacy concerns. Access to user's data and open architecture is a key to increased adoption that can potentially lead to monetization, but Facebook needs to be careful here not to piss of the users. Compare this with Google few years back where Google made a conscious decision to keep the search results rank clean (do no evil) and that strategy paid off when Google started monetizing via AdSense.
Marketers argue that the spending power of the current demographics of Facebook is not high, so why bother? This is true but don't forget that when these millennial grow up to buy that 60" plasma TV, some companies do want to make sure that they have a brand tattooed in their heads from their previous branding experience on such social networks. As pointed out by many studies, the millennial are not brand loyal and that makes it even more difficult for the marketers . The Facebook is a great strategic brand platform to infuse the brand loyalty into these kids.
Data portability is part of longer term vision for any social network. The applications are constrained inside a social network, but an ability to take the data out in a standard format and mesh it up with an application outside of Facebook has plenty of potential. Leading social and professional network providers have joined the Data Portability Group. Imagine to be able to link your Facebook friends with your LinkedIn contacts and provide a value add on top of that. There are plentiful opportunities for the social network providers to build the partner ecosystem and have the partners access to the data and services in the process of co-innovation. LinkedIn for the longest time resisted providing any APIs and relied on their paid subscription services. LinkedIn has tremendous potential in the data that they posses and standardizing the formats and providing the services has many monetization opportunities. It is good to see that LinkedIn has also joined the Data Portability Group and has also promised to open up APIs. Google's OpenSocial effort, partially opening up Orkut as a sandbox, and social network visualization APIs are also the steps in the right direction.
What I can conclude that the growth of such social networks is in two directions, platform and verticals. As platform becomes more open we can anticipate more participation, larger ecosystem, and service innovation. This should help companies monetize (no, no one has figured out how). The growth in vertical will help spur networks for specific verticals such as employment, classifieds, auction - who knows?
Monetization, experience design, and privacy cannot be separated from one another and few wrong strategic decisions could cause significant damage to the social network providers and their users.